How Blockchain Streamlines Fixed Income Trading

How Blockchain Streamlines Fixed Income Trading

By Capital Markets CIO Outlook | Tuesday, June 30, 2020

Blockchain brings with it transparency and trust, thereby stabilizing the fixed income trading market.

FREMONT, CA: Although blockchain emerged as the technology that was intended to transform the world of financial transactions, it is gradually revolutionizing various aspects of capital-involved processes. Investment and trading are no exceptions. When it comes to fixed income trading such as bond markets, blockchain can serve as a single source of truth. Agreements involving multiple parties such as bonds can be managed entirely on a decentralized network. The above is possible as blockchain technology can act as a platform enabling the large institutions to transfer data and share information on a peer-to-peer basis securely.

Blockchain promises a wide range of applications in the fixed income trading sector. Here are some of the major advantages of leveraging the blockchain in the fixed income trading industry.

Reduces Costs

In the case of a blockchain-based network, the protocol used is responsible for the reconciliation overheads. Various actions on the network, including payments of interests and delivery of bonds and the issuance and trading of bonds, are written to the blockchain. The transaction records are shared with other institutions via an algorithmic reconciliation process called consensus. Thus, a significant amount of money is saved due to automatic reconciliation supported by blockchain technology.

Boosts Issuance Process

Conventionally, bond issuance involved a number of parties, from the issuance firm to various forms of banks, rating agencies, and legal counsel. There are a number of processes involved, such as negotiations, emails, and documentation that can require weeks. Alternatively, blockchain is used to issue and validate contracts, with the help of single decentralized data stored on the ledger. Apart from the saved expenses, the blockchain-based approach of bonds issuance is much faster than the traditional methods.

Fosters Trusts among the Parties

With the elimination of intermediaries, the trust factor is significantly enhanced with blockchain in the fixed income trading landscape. Further, blockchain offers a number of advantages over a centralized setup. Automated traders, records, and payments without the need of a referee in the middle enhance trust and make blockchain even more lucrative for the various stakeholders.

Fixed-income trading will benefit largely from the efficacies offered by blockchain. The current advancements bespeak the future of trading essentially.

See Also :- Top Blockchain Technology Companies

 

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